What Happened to Democracy?

Which programs should be cut, which entitlements pared back, and which taxes raised in order to reduce the long-term budget deficit? Hmmm. Let's convene a commission and have it decide. At least this is what several members of Congress and the Obama White House are proposing.

Commissions are a default mechanism when politicians want to hand off difficult issues to "experts." But reducing the long-term budget deficit has almost nothing to do with expertise. It's about our nations' values and priorities. These choices are supposed to be made democratically.

Democracy requires at least three parts: Important decisions are made in the open. The public and its representatives have an opportunity to debate and influence them. And those who make the big decisions are accountable to voters.

But these principles are in retreat. The Troubled Assets Relief Program began with a virtual blank check from Congress. Treasury officials then secretly decided which companies would receive hundreds of billions of dollars. Why these companies were chosen and not others remains a mystery. For months, the Treasury didn't even disclose the identities of the major banks that the giant insurer American International Group repaid in full with its bailout money.

The Federal Reserve, meanwhile, has gone far beyond its traditional role of setting short-term interest rates. It has bought up massive amounts of debt -- -mortgage debt, Treasury bills, and debt instruments from quasi-public agencies. No one outside the Fed knows the ultimate beneficiaries, the criteria used by the Fed for making these commitments, or even how much debt the Fed is buying.

Even if the economic emergency justified such secrecy -- and it's hard to see exactly why it would -- the emergency is over, yet closed-door decision-making continues. Will Treasury use what's left of TARP to help stimulate more jobs and, if so, how? Will the Fed stop buying mortgage-backed securities? No one knows.

The same pattern is evident on other issues. Congress can't decide whether or how to limit the pay of financial executives. So where does the issue end up? The Fed says it will decide whether pay levels are appropriate. The House and Senate can't agree on what to do about climate change. Who decides? The Environmental Protection Agency concludes it has authority to regulate carbon emissions under the Clean Air Act.

The debate over health-care reform looked like democratic deliberation until you realize the key negotiations that framed the deal occurred behind closed doors, between the White House and Big Pharma and Big Insurance. The administration promised these industries some 30 million new paying customers. In return, it agreed not to oppose the plan. Big Pharma even placed a firm limit on how much it would cut its costs over the next 10 years -- $80 billion, and not a penny more. How do I know this? Not because this crucial deal was made in public but because it was leaked to the press.

Personally, I want the government to limit the pay of financial executives, regulate greenhouse gases, and reform health care. And no one wanted a financial meltdown. But I'm appalled by the process that's been used to reach these objectives.

A big piece of the problem is that Washington is so overrun by lobbyists representing moneyed interests that it's become almost impossible to make policy in the open. If the Treasury and Fed tried to decide publicly which industries and firms should get hundreds of billions, they'd be inundated. Wall Street lobbyists are blocking real financial reform. The energy industry has filled the House's cap-and-trade bill with special subsidies and exemptions. Big Pharma and Big Insurance would have killed off the health-care reform if they hadn't been bought off. When it comes to the long-term deficit, Congress is incapable of acting.

But the answer isn't to give up on democracy. Back-room policy-making can succumb to private interests just as easily as lobby-infested legislatures can (much of the public suspects the Treasury of being too cozy with Wall Street as it is). The real answer is to recommit ourselves to cleaning up democracy. This means adequate public financing for congressional and presidential candidates who refuse private funding, more constraints on lobbyists, tighter rules for who must register as a lobby-ist, fuller disclosure, and tougher rules on the revolving door between public service and private gain.

Yet nobody seems to be talking about these sorts of reforms. They don't appear on Obama's agenda. True, they don't generate lots of public excitement, and they're murderously difficult to enact. But without them our democracy doesn't stand a chance.

About the Author

Robert B. Reich, a co-founder of The American Prospect, is a Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. His website can be found here and his blog can be found here.